Abstract
We show that the recent tendency of increasing labor force participation in age groups 55-59 and 60-65 can be explained by lower unintended bequests caused by the observed compression of mortality. This result arises from introducing imperfect annuity markets and uncertain survival into a model where individuals live in two overlapping generations. In addition, we show that annuity market imperfections may provide a utilitarian rationale for a public pay-as-you-go pension system that counterbalances the intergenerational transfer of wealth from unintended bequests.
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